Element Group Releases New Analysis of Bitcoin’s Futures Curve

Findings Indicate that Bitcoin’s Futures Curve was Effectively Flat
and in Backwardation

April 25, 2018 09:00 AM Eastern Daylight Time

SANTA MONICA, Calif.--(EON: Enhanced Online News)--Element Group, a full-service advisory firm for the digital token
capital markets, today released a newly published analysis indicating
that bitcoin’s futures curve teetered between being effectively flat and
in a backwardation state for most of Q1. According to the research, this
downward curve is significant in that it implies that there is little
conviction in the bitcoin futures marketplace, with the current spot
price being greater than the expected futures spot price.

“We’ve found that there are many dynamics in the marketplace influencing
bitcoin trading activity, with hedging and risk management as the
leading motives”

In analyzing bitcoin’s futures curve, Element reviewed trading patterns
ranging from bitcoin’s first future trade in December 2017 to market
movements as of the end of March 2018. In addition to outlining the
findings and their importance in what continues to be a nascent
marketplace, the Firm also offers its insights and perspectives on how
bitcoin’s futures curve should be calculated, a debate that has
consistently been at the center of cryptocurrency trading circles. For
those new to futures trading, the report provides an educational
overview of how trends of the futures curve are characterized.

“Given that bitcoin has only been trading for a few months, the ‘normal’
state of the markets has yet to be determined, and an efficient lending
market for cryptocurrency does not yet exist,” said Stan Miroshnik, CEO
and Co-Founder of Element Group. “Identifying and analyzing the initial
trends in this largely uncharted and volatile sector is critical to
creating a sustainable and lucrative next generation of capital markets.”

The report also takes a deep dive into the Commitments of Traders (COT)
reports published by the CFTC, the positions of various types of
traders, as well as the factors that have influenced trading activity
over the past few months. For example, holding bitcoin poses risk
associated with having the proper security infrastructure in place to
prevent being hacked. Some traders consider this to be a cost, and
therefore, put a premium over having access to bitcoin exposure in the
future and are more willing to pay more for the futures price. Others
view the futures product as a hedging mechanism and have no directional
view of the future price of bitcoin, but rather are more focused on
protecting downside deviations.

“We’ve found that there are many dynamics in the marketplace influencing
bitcoin trading activity, with hedging and risk management as the
leading motives,” said Thejas Nalval, Director of Portfolio. “Currently
the large traditional types of holders involved in the bitcoin supply
chain are willing to sell contracts at the current spot price, or even
slightly lower, in order to protect the downside risk. This paradigm
tends to manifest itself into this backwardation theme we’re saying play
out with the futures.”

Element Group is a full-service advisory firm for the digital token
capital markets that delivers advisory, capital markets, technology and
asset management services in an integrative manner. Element manages
investor and client funds on a non-discretionary basis, investing in
promising emerging protocol and dApp technologies and utility driven
crypto-currencies. Element also executes token sales and ICOs and
supports market-leading transactions with technology, bridging the gap
between token buyers and issuers, and delivering thought leadership on
structuring and process.